Two things to note about the Obama tax plan:
First, there is little evidence that the proposed tax increases on high-income households would seriously harm the economy. The effective average tax rates at the top would be about the same as they were in the mid-'90s, which if memory serves were boom years for investment and entrepreneurship, boom years for the U.S. economy, and boom years for federal revenue.
Second, even with the Obama tax plan, the distribution of after-tax income would still be roughly where it was only four years ago.
The reality is that the market's tilt toward unequal outcomes is now so strong that you can't just rely on a progressive tax code to counteract its effects...
Friday, August 29, 2008
Limits of Tax-Based Redistribution
Washington Post columnist Steven Pearlstein makes some good points about inequality, and Barack Obama's plans to chip away at it through the tax code, by lowering taxes for middle- and lower-income people while raising them at the top. Pearlstein writes: